What is the mortgage process? If you don't have enough money to buy a home with your own cash - and most people don't - you'll need to secure a mortgage loan. You firstly need to apply to a lender for one and you should expect to field searching questions about your financial affairs and to be able to produce evidence that you'll be able to pay the loan back.
If your application is successful, three stages follow before you are granted your loan. These are:
Get a Mortgage Agreement in Principle
Book your Mortgage Valuation
Receive your Mortgage Offer
This article gives explains what happens at each stage and offers tips and guides of what you can do during the mortgage application process to make it as smooth as possible.
Step 1 - Applying for a mortgage in principle
Once you have chosen a mortgage lender you'll first of all need to make a mortgage application to them. After you've applied for a mortgage, if you are successful, your lender contacts you to tell you that you've received an agreement in principle mortgage. You may think that the mortgage application process is over, however this is only the first stage completed and you are still a few weeks away from getting your mortgage offer.
A Mortgage in Principle
is when a lender tells you that it is prepared to lend you, in principle, a defined sum, towards buying a property. It is 'in principle
' because the lender then has to value any property which you have an offer accepted on to decide whether the home is worth the money that it has in principle offered you money towards. It is dependent on your household income multiples as well as affordability based on Mortgage Market Review criteria
Declare if you are getting a gift or a loan
If you are getting a gift
or a loan from a parent or friend then you need to declare this to your mortgage lender at the earliest stage possible as it could affect whether they will lend to you or not. If you aren't sure whether the money is a gift or a loan then read this article - Is it a gift or is it a loan?
What should you do after receiving a Mortgage in Principle?
You are now able to look for properties you like and are able to buy limited to the sum the lender has offered you in principle and your own resources.
Once you have found a property you like, you put in an offer to the vendor. Once you've had an offer accepted - congratulations! - you then book your Mortgage Valuation.
Step 2 - What is a Mortgage Valuation?
You must pay for your mortgage valuation with your mortgage lender (Read more about the Mortgage Valuation)
, in which your lender sends a surveyor to the property to inspect it to see if its value is consistent with the sum the lender is prepared to offer you to buy it.
If the lender decides, after the surveyor has delivered to it their valuation report, that the property is not worth the money or it has defects, it may either refuse to lend you the money on that property or set conditions which you must fulfil if they are to lend. It might, for example, stipulate that you have to carry out, at your expense, a Pre-Purchase Survey to examine an issue it has found. Issues can include, for example, subsidence, radon gas or drainage problems. Once again, if this survey indicates many problems, the lender can refuse to lend on the property.
Is a Mortgage Valuation the same as a home buyers survey?
. The former is purely for the lender's benefit and focuses mainly on establishing a property's market value - read more about this here
. The latter involves you booking a surveyor who works on your behalf to establish if the property you've set your heart on has any defects. If there are, you can bargain with the vendor to contribute towards or even pay all of the costs of remedying any issues or even choose to pull out. We always advise you to get a home buyers survey (click to get a quote for a home buyers survey)
: you are probably about to spend the largest sum of money you've ever spent in your life and ideally need an expert opinion on whether your property has any issues which might prove exorbitant to fix further down the line.
Once your Mortgage Valuation
survey has taken place and the surveyor has returned their report to the lender, the lender either agrees to grant you a mortgage, tells you that it will grant it under certain conditions or refuses to grant you the loan for that property, in which case you can either appeal or look for a fresh home to buy.
If you need a RICS Building Survey or HomeBuyer Report then call our team now on 0333 344 3234.
Step 3 - Mortgage Offer
If a lender is satisfied with the Mortgage Valuation report, it then tells you and you receive your Mortgage Offer. This is a highly important stage which you must reach before you can exchange contracts with the vendor. Unless you are a cash buyer, a seller will pull out of dealing with you if you can't prove that you will be lent enough cash from a lender to cover the agreed purchase price.
The mortgage offer is unlikely to be rescinded unless it is found out through the conveyancing process that there is a legal issue or if any of the information provided to the mortgage lender is incorrect. The solicitor acts for the mortgage lender and satisfies their requirements which are shown in the mortgage offer and also the Mortgage Lender's Handbook which can be found on the Council for Mortgage Lenders' website.
Mortgage lenders require you to buy property searches before they'll agree to give you a mortgage. What searches they require are set out in the Council for Mortgage Lender's Handbook
. The minimum requirement is the Local Authority search, however they may also require the Environmental Search and Water & Drainage Search. You can read about all of the property searches here